Professional Documents
Culture Documents
IPO
Facebook IPO
Facebook is a place where people spend most of their time as compared to any other internet property
Facebook an online social networking site, founded on February 4 , 2004 by Mark Zuckerberg with his
With 845 million active users and 2.7 billion daily likes and
comments in just 8 years Facebook IPO undoubtedly became one
Why did
go
public?
Facebook had issued its shares at $ 38 per share. But do you really think the stock traded at $38 per share?
Facebook IPO was launched at stock price $ 38 but it did not trade at $38 till August 2013
Looking at the graph you can see that from May 2012 till August 2013 stock price was trading below $38
What went
wrong with
IPO ?
Bad Valuation
Advertising
Others
As numerous experts have noted, the click-through rate on Facebook ads averages a dismal 0.051%,
In other words, Dozens of other websites have discovered, customers respond poorly to online
advertising, and prefer to shop via sites they find on their own
Bad Valuation
Due to this many advertising company may withdraw their money from
the Facebook site
The fact is that Facebook has not yet been able to find an ad model which
generates revenue proportionate to its revenue
Facebook had sets its price at $28 $35 per share. But just before the IPO is launched the company raised
the price to $38 per share
After the negative disclosures and insider trading it became very clear that the facebook shares were not
perfectly priced
Bad Execution
The timing of the key activities makes you wonder what signal the company was sending out
For example, the analyst handling IPO had cut the forecasts of the firm after the IPO filing update
At the same time Facebook leaders and their Investment Banking colleagues were pushing for sale at the
top end of their price range
Facebook had faced a number of lawsuits following its IPO. Just prior
to IPO , Morgan Stanley as well as many other analysts lowered the
Facebooks earnings expectations which were not disclosed in
Facebooks S 1 filing
Facebook had repeatedly warned in the IPO filing about the challenges they were facing in the
mobile advertising
Due to this large investors made huge profits by betting against the
company or many others avoided major losses by backing out of the IPO
just in time, while small investors were left with overpriced shares
Since, 57% of the shares sold in the IPO came from Facebook insiders, investors had lacked confidence in
the stock
Technical Glitches
On the day of the trading, the stock opening was delayed due
to technical glitches, as NASDAQs electronic trading
platform was unable to handle the high volume of trades
Due to this some investors failed to sell their stock during the
first day of trading while the stock price was fallingforcing
them to incur bigger losses when their trades finally went
through
Due to all this reasons Facebook was not trading at the price on which it had launched i.e. $38 per
share
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